New year, new money goals! Money is consistently in the top three new year resolutions people set for themselves. Earning more, saving more, and investing more are some of the common goals people have for themselves.
Investing in particular remains shrouded in mystery for a lot of people. Investing terms can sound intimidating, and it can be hard to find an easy way to learn about investing. If one of your goals is to invest more, we’ve got some insight on where you should invest your money for 2018.
When it comes to investing the first thing you need to do is to establish a goal for yourself. Are you investing for the short or long term? Is the money going into a retirement account or a taxable account? Before you invest your money anywhere, take the time to design an investment plan for yourself.
If You’re Investing For Retirement
Investing your money for retirement is an admirable and necessary goal. Pensions are all but gone, and we’re responsible for our own retirement savings in large part.
Retirement is a long term goal for most people. Most Americans plan to retire at 66, but the numbers show that average retirement age in the US is 62. Even if you’re in your 40’s, that’s at least twenty years of investing!
So for retirement accounts, we want to put our money in low fee accounts where they have the best chance of growing over the years. Retirement target date mutual funds are a good bet for those who want the simplest route to retirement. They can have slightly higher fees than regular index funds, but they also automatically balance themselves as the years pass, so that you go from more active investments like stocks, to more passive ones like bonds. This is an adjustment you want to make as you age, because bonds are safer than stocks. As your working years end, you want your money to be safe.
Target dates funds are a good starting point. Read more about them here to see if they’re a good fit for you.
If You’re New to Investing
Low fee index funds are always a great choice. Index funds are a collective of many funds, so your money is automatically diversified. They also have low fees at pretty much any brokerage firm, which keeps more money in your pocket. These are a good place for newbies, because they have a good return rate over the years, are diversified, and have low fees.
If You’re Investing For 7 Years or Less
Some people choose to invest for the short term. Say you want to buy a house in five years; you can choose to invest your money to chance higher returns than you’ll get from keeping it in a low interest savings account.
For these kinds of goals, you can invest in something like a CD, which has a higher interest rate than a savings account. A CD is a certificate of deposit, and it comes with a higher interest rate but also a firm hands off rule. You can’t take the money out for a set amount of time without incurring high fees. You can get a CD at any bank or credit union.
You can also try something like a short term bond fund. These again have higher interest rates but do carry slightly more risk than a savings account or a CD. This article has some helpful tips for short term investing.
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Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.